Skip to main content

Magna chairman and founder Frank Stronach takes a call at the company's Aurora, Ont., headquarters.J.P. MOCZULSKI

Major shareholders of Magna International Inc. have vowed to continue the battle against the buyout of Frank Stronach's multiple-voting shares, saying the additional disclosure ordered Thursday by the Ontario Securities Commission does not resolve the bigger problem of the excessive price the company is offering for the shares.

The giant Canada Pension Plan Investment Board will oppose the deal in court when it moves forward for approval by the Ontario Superior Court, chief executive officer David Denison said Friday.

"If it goes that far, we will definitely seek to appear before the court and speak to the issues there," Mr. Denison said in an interview. "That is the ultimate decision, where the fairness will be determined. As the OSC has indicated, it is not in their ambit to opine on the fairness of it, but this is absolutely required [by the court]"

Magna's $863-million deal to purchase all of Mr. Stronach's Class B multiple-voting shares is structured as a plan of arrangement, which means it requires a court to approve the fairness of the deal before it can be completed.

Cat:e528746c-3414-401a-b14b-50247e3bdf01Forum:d0fa4e14-88d2-41f9-8a19-896bdff9544b



But before the deal can get to that stage, the company will hold a shareholder vote on the offer, which has been delayed following the OSC ruling late Thursday. The commission said Magna must provide more information to investors before a vote can be held, but concluded the transaction is not abusive of shareholders or the capital markets.

"A transaction such as this is not abusive simply because the price proposed to be paid is considered by certain investors to be outrageous," the panel said.

In its ruling late Thursday, the OSC said it wants significant additional information included in a new proxy circular for shareholders. OSC staff will review the disclosure five days before it is sent to shareholders to make sure the issues raised at the hearing are addressed.

Magna postponed a vote scheduled for Monday in the wake of the ruling, and has not set a date yet for a new vote. But it said it would provide the disclosure the OSC is seeking.

CPPIB and five other large investors banded together to oppose the transaction at the OSC hearing this week.

The Ontario Teachers' Pension Plan, British Columbia Investment Management Corp., Alberta Investment Management Corp. and Montreal investment firm Letko Brosseau & Associates Inc., said Friday they will continue to oppose the transaction.

"We've won a battle here but the war is far from over," said Peter Letko, a principal of Letko Brosseau.

The decision gives those opposing the transaction time to change the minds of those who support it, with the help of additional disclosure about all the elements of the plan, Mr. Letko said. "The key here is for shareholders to take this opportunity and think very carefully about what they're giving Frank," he said.

Teachers is also considering its legal options, senior vice-president Wayne Kozun said Friday, but has not made a decision yet on its next move.

Mr. Kozun said Teachers supports the OSC's calls for greater disclosure, but is disappointed the commission didn't go further to find the deal abusive and strike it down.

Mr. Denison said CPPIB has an alternative proposal for investors to consider to reduce Mr. Stronach's influence over the company without incurring the huge expense of buying out his shares.

He said Magna's board of directors has a fiduciary responsibility to cancel Mr. Stronach's lucrative consulting arrangement with the company when it comes up for renewal at the end of the year, removing him from an active role at the company and also ending the significant "transfer of wealth" that has occurred for years.









University of Toronto law professor Anita Anand, who specializes in securities law, said the OSC has "taken a very useful and strong step" in its ruling. She said it is a new direction for the OSC to order a company to disclose all information to shareholders that was given to a special committee of independent directors in cases where the committee made no recommendation on the transaction.

But Prof. Anand said it won't be easy for shareholders to get the Ontario Superior Court to rule the deal is fundamentally unfair once it has gone through the required process of a shareholder vote.











MAGNA INT'L (MG.A)

Close: $72.33, down 67¢

Follow related authors and topics

Authors and topics you follow will be added to your personal news feed in Following.

Interact with The Globe